A severe fragmentation of the global economy after decades of increasing economic integration could reduce global economic output by up to 7 percent, but the losses could reach 8-12 percent in some countries if technology is also decoupled, the International Monetary Fund said in a staff report.
The IMF said even limited fragmentation could shave 0.2 percent off of global GDP, but said more work was needed to assess the estimated costs to the international monetary system and the global financial safety net.
The report, released late Sunday, said that the global flows of goods and capital had leveled off after the global financial crisis of 2008-2009, and a surge in trade restrictions seen in subsequent years.
"The Covid-19 pandemic and Russia's invasion of Ukraine have further tested international relations and increased skepticism about the benefits of globalization," the report said.
It stated that deepening trade ties had resulted in a large reduction of global poverty for years, while benefiting low-income consumers in advanced economies through lower prices.
